Shareholder value above employees at all cost

Key Idea: Profit-sharing plans for rank-and-file employees are vanishing as corporate America has adopted a “shareholders above all else” approach.  Companies like Amazon.com have been built on the backs of warehouse workers who toil away in abominable conditions under huge amounts of stress.

Half a century ago, a typical Sears salesman could walk out of the store at retirement with a nest egg worth well over a million in today’s dollars, feathered with company stock. A warehouse worker hired now at Amazon who stays until retirement would leave with a fraction of that.

This shift is broader than a single company’s culture, reflecting deep changes in how business is now conducted in America. Winner-take-some have evolved into winner-take-most or -all, and in many cases publicly traded companies are concentrating wealth, not spreading it. Profit-sharing and pensions are a rarity among the rank-and-file, while top executives take home an increasing share of the spoils.

But this month, Amazon stopped giving stock to hundreds of thousands of employees, even as it lifted its minimum hourly wage to $15. While the raise garnered headlines, the move to curb stock awards may ultimately be more significant.

Not only does it reverse what had been an unusually broad employee stock ownership program, Amazon’s decision underscores how lower-paid employees across corporate America have been locked out of profit-sharing and stock grants

Amazon back – loads the grant so that workers get 5 percent after year 1 , 15 percent at the end of year 2, and then 20 percent every six months for the next two years . You might say Amazon back – loads the stock grants to create an incentive for employees to stay at the company . The other explanation is that Amazon knows most people can’t survive for long in its brutal culture , and back – loading means the company will pay out less. In 2013, [inlinetweet prefix=”” tweeter=”” suffix=””]Amazon had the second – highest turnover rate of any company in the Fortune 500, with the average employee lasting only one year[/inlinetweet] , according to a study by PayScale, a company that tracks compensation.

When Amazon announced plans in 2017 to build a second headquarters, Bezos did not ask where he could do the most good or how he could help the most people. Instead, he invited American cities to compete for his business, asking who would do the most for him. More than two hundred cities, among them some of the poorest in the United States—Detroit, Cleveland, Cincinnati, Milwaukee—submitted plans. Hoping to land Amazon in the benighted city of Newark, the state of New Jersey offered $7 billion in tax incentives. And so we were treated to a hideous spectacle: here were some of the poorest people in the United States offering to pay the world’s richest man so that he might bless them with an office complex.

Welcome to the economy where employees have no stake in the company they work for.

Today it’s all about Wall Street, investors and VC’s getting a huge payout employees be damned.  Sure, your reed about tech companies that have perks like free lunches and massages, but what you’re not reading is that most of the managers at these companies are incompetent.

[inlinetweet prefix=”” tweeter=”” suffix=””]Companies might offer parties, snacks, and Ping-Pong, but are stripping away things lower on Maslow’s hierarchy of needs, like job security.[/inlinetweet]

Today, most employees work for managers who are young, inexperienced, and undertrained—or sometimes completely untrained. Their bosses tell them that their jobs are not secure, that they are powerless, and that they could be fired at any moment without any reason. They are subjected to personality assessments and herded into team-building exercises. They are exposed to brainwashing techniques, force-fed notions about “culture,” and informed that their success hinged on their ability to fit in with the others, but that the others didn’t like them. They were told that they are failing, but didn’t tell how or why.

The new compact says, essentially, that corporations owe no loyalty to workers, and that workers should not expect any kind of job security. This compact encourages workers to view themselves as independent agents, competing against one another for work.

“If you’re living in fear of losing your job, then all of your decisions and actions are geared to preserving your job rather than taking risks,”

[inlinetweet prefix=”” tweeter=”” suffix=””]“If you treat people the way you’d like to be treated, if you praise them, and thank them, what a surprise! They do a good job on the whole.[/inlinetweet]” That sounds like common sense. Yet unfortunately the idea that a company might be good to its employees has become so unusual that some people do not even think it is possible.

You can’t treat people well when you’re a venture-funded company. The venture capitalist investors would not allow it. Once you go public, Wall Street won’t tolerate it, either. For half a century, bankers and venture capitalists have been told that they are the only ones who matter, that companies exist solely to deliver the biggest possible return to them. That’s the gospel of shareholder capitalism, the doctrine created by Milton Friedman.

It’s really a huge paradox.  On the one hand great brands need their people and need to treat them well; on the other hand, they view employees as a cog in a machine and don’t offer them a chance to be part of the company they work for.

Today the unemployment rate is relatively low, but look under the surface and you’ll find that wages are stagnant, employees are stressed out and that any small raise is being eaten by increases in health insurance costs.  Yet, employers demand perfection and dedication and don’t understand how disgruntled employees can negate the best products or brands.

Someday companies will learn to treat their employees well beyond massages and free coffee.

About richmeyer

Rich is a passionate marketer who is able to quickly understand what turns a prospect into a customer. He challenges the status quo and always asks "what can we do better"? He knows how to take analytics and turn them into opportunities and he is a great communicator.

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